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The Evolving Purpose of a Corporation

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Spence Hoole Summit 2019 Opening Remarks

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The Evolving Purpose of a Corporation

  1. 1. The Evolving Purpose of the Corporation
  2. 2. 2| 2| 2| Corporate Mission: Shareholders vs Stakeholders Shareholder Primacy “There is one and only one social responsibility of business – to engage in activities designed to increase its profits.” Milton Friedman, Economist, Nobel Laureate, 1970 Paramount duty of managmeent and boards is to the corporation’s stockholders, not stakeholders
  3. 3. 3| 3| 3| Corporate Mission: Shareholders vs Stakeholders Stakeholder Focus “. . . we share a fundamental commitment to all our stakeholders . . . Each of our stakeholders is essential.We commit to deliver value to all of them, for the future success of our companies, our communities, and our country.” Business Roundtable, August 19, 2019 Elevating interests of all Stakeholders - Customers, Employees, Suppliers, Communities, the Environment, etc.
  4. 4. 4| 4| 4| Corporate Mission: Shareholders vs Stakeholders Do you lean more towards: 1) Shareholder Primacy Paramount duty of management and boards is to the corporation’s stockholders, not stakeholders or 2) Elevating interests of all Stakeholders Fundamental commitment to all stakeholders - customers, employees, suppliers, communities, the environment, etc.
  5. 5. 5| 5| 5| Corporate Mission: Shareholders vs Stakeholders Which statement do you agree with more? 1) Socially popular commitments to multiple stakeholders will undermine long term financial discipline. or 2) In the long term, both shareholder interests and stakeholder interest converge.
  6. 6. 6| 6| 6| ESG -Environmental -Social -Governance Which of these statements do you most agree with? 1) Current ESG movement is overrated. Companies, in general, have historically been good corporate citizens. 2) ESG should be highly emphasized by boards, management and investors but not mandated Used as the overall framework to serve all stakeholders and long- term interests of shareholders 3) ESG intiatives should be regulated to ensure boards / companies consider society’s larger goals. Board compostion – % of women, emloyees to select a % of directors, “Acountable Capitalism Act” and “Corporate Executive Accountability Act”
  7. 7. 7| 7| 7| Purpose and Profit: An Inextricable Link “Purpose is not the sole pursuit of profits but the animating force for achieving them.” “Profits are in no way inconsistent with purpose – in fact, profits and purpose are inextricably linked.” Larry Fink, CEO, Blackrock
  8. 8. 8| 8| 8| The Nature of the Corporation: 10 Questions for Leaders, Boards and Companies 1. What is our mission and purpose as a company? 2. How far do we go beyond shareholder capitalism? How are we accountable to different stakeholders? 3. Who benefits in our economic success? How? 4. What is the time horizon for managing our economic success and impact? 5. What is our responsibility to our workforce, especially given future-of-work implications? 6. How do we leverage data and technology responsbily and ethically? 7. What are our aspirations for inclusion and diversity? 8. What is our responsibility for societal and sustainability issues involving our business, and beyond our business? 9. What are our responsibilities regarding participants in our platforms, ecosystems, supply and value chains and their impact on society? 10. How should we address the global and local [including national] imperatives and implications of how we compete, contribute and operate? From James Manyika, Chairman of the McKinsey Global Institute

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